China's Housing Construction Set For Third-Year Contraction: Consensus Report From Goldman Sachs, Morgan Stanley And UBS

China’s housing construction downturn is expected to continue into 2024, implying that governmental efforts to curtail the slump have been unsuccessful, as per a consensus by top investment banks on Wednesday.

What Happened: A consensus including Goldman Sachs Group Inc, Morgan Stanley, and UBS Group AG indicates that China’s housing construction is set to decline for the third year in a row, as per a Bloomberg report.

The Chinese government’s initiatives to boost housing demand have not been able to reverse the property market downturn. The property sector’s contribution to goods and services demand has been dwindling, with real estate-related demand now making up around 20% of the GDP, a decrease from 24% in 2018.

Goldman Sachs economists, led by Hui Shan, anticipate a “double-digit” contraction in real estate fixed-asset investment in the coming year, potentially lowering real GDP growth by one percentage point. Morgan Stanley and UBS predict a drop of 7% and 5%, respectively, in the gauge. Even Chinese economists share a bearish outlook, as China Merchants Bank International anticipates a 7% decline in real estate investment.

Why It Matters: The prolonged slump in China’s property sector is not isolated; it has been brewing for some time. Back in September, fears were sparked regarding a potential global recession akin to 2008 due to the distress in the Chinese property market.

In October, China SCE Group Holdings Ltd., one of China’s most trusted real estate brands, defaulted on billions in offshore bonds.

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